Packaging Council of Australia

A New Covenant? Some of the Issues

The outlook for the Covenant is promising - not certain, but promising. Most, but not all, of the key Government officials are favourably disposed to its continuation. Over the next six months we need to marshal the case for MKII. We need to be able to go to Ministers with a good story to tell.

The Covenant - Its Achievements:
From a governmental perspective, the Covenant has been, by far, the most effective national policy instrument dealing with packaging.

With 575+ company signatories, the Covenant has more than met expectations about numbers. Prior to it, the material specific agreements generally covered only packaging manufacturers (and the beverage industry) with less than 30 company signatories.
The fact that industry is now contributing directly to State-based recycling processes is also a plus.
The Covenant provides a mechanism for consideration of contentious issues, e.g., plastic bags.
There is recognition that the substance of Action Plans is subject to continuous improvement and that efforts must be made to lift the standard.

From an overall industry perspective, the Covenant's great achievement is that we have avoided the excesses of the European approach:

As Perchard points out … "the Covenant has provided an effective framework to improve the environmental performance of the packaging and packaged goods sector without damaging Australia's competitiveness in this sector".
The Covenant has also taken a lot of "the heat" out of government/industry discussions on the packaging environmental issue. On all sides there is a much greater element of trust and understanding. The Covenant Council provides a standing forum for discussion and resolution of contentious issues.

Overall, there is no real argument against the Covenant from industry.

Some "brandowners", while initially hostile to the NEPM, have come to accept it.
Some companies feel they have been pressured/coerced into the Covenant, while others are going "through the motions" and wish the issue would simply "go away".
Against this, there is a recognition that the Covenant does provide protection against more draconian policies and that it is the "least worst" of all the options.

Accordingly, companies in the supply chain are overwhelmingly in favour of retaining the Covenant.

Local government's attitude toward the Covenant is not cohesive or united. A substantial part of local government has not been touched by the Covenant. There are many views and strong disagreements within local government.

Officially, the Australian Local Government Association is hostile and wants CDL introduced nationally.
The pro-CDL push is strongest in NSW where not one local government council or representative organisation has signed up to the Covenant.
In all the other States and Territories (excluding the NT), local government councils/representative organisations are signatories. The strongest local government support comes from Victoria and Queensland. There are, however, increasing join-up rates from local governments in South Australia and Western Australia motivated, in a large part, by the prospect of accessing "transitional funding".

In any negotiations on Covenant MKII, the official national local government view is likely to continue to be hostile and pro-CDL, but many State associations and individual councils will be more ambivalent, if not privately supportive.

The Weaknesses
Notwithstanding its achievements, there are areas where the Covenant can be improved:

Slow Implementation - It has taken a good deal of time to put the "machinery" into place. Some companies took an inordinately long time to sign up and then only under "threat" of the NEPM. After 3½ years, WA is only just putting its NEPM into place.
Governments - In some cases governmental support has been less than full-blooded. Some have been slow to implement the NEPM (WA), while others have acted in a way not helpful to the spirit of the Covenant, e.g., the CDL inquiry in NSW.
Action Plans - Some are soft/fuzzy. To some extent this was inevitable as many companies were producing such documents for the first time. Efforts are underway to "lift the bar".
Funding Issues - There are two issues:

The "transitional fund" was put in place to produce a "market based" kerbside recycling system. There have been improvements (particularly in Victoria) and there are good prospects in Queensland.
At present we have $5.1+ million in the industry fund, with no new projects awaiting funding. Spending will pick up in the coming year with new projects coming on stream.

The Process - Some of the State-based processes associated with the Covenant have proved to be bureaucratic and resource intensive and often parochial and difficult for industry to adequately manage and co-ordinate. Some State JRGs have not operated efficiently or well.

In my view, these "weaknesses" are largely administrative and process-type issues. They are capable of being fixed without altering the Covenant itself.

Some Practical Issues
In coming to a judgment on these matters there are some important practical issues to bear in mind:

Changing the Covenant. If the Covenant is to be significantly changed there will be some flow on consequences:
The negotiation of the present Covenant took at least two years and its often difficult implementation (through the Covenant Council) involved extended debates. Some of the time taken reflected the tensions involved in the establishment of an entirely new relationship between the three key sectors involved. The development of a substantially new Covenant will require new negotiations and the outcome may not be as favourable.

The beauty of the present Covenant (the key document) is that the wording itself has never been a problem for any party to the Covenant.

We cannot assume that all the present company signatories will simply agree to become signatories to a substantially new Covenant. We would need to go through a new signing up process. That will take time. In short, a major asset of the Covenant is its approximate 600 signatories and we need to protect that asset.
Recycling and Sustainability - The present Covenant undoubtedly has a bias towards recycling. This reflected the push by local government to increase funding for kerbside as well as the desire of State Governments to ease the political pressure on this issue. There are good grounds for broadening the focus of the Covenant to take greater account of sustainability issues. Politically, however, kerbside recycling will remain a "sacred cow". All spheres of government are likely to be hostile to any moves to eliminate or substantially weaken the focus on recycling. But, as Perchard points out, our support for recycling should be sensible and balanced and not at any cost.
Funding. In Covenant MKII, whether the same or radically different, there is likely to be an expectation (from all spheres of government) that industry will continue to provide funds for agreed activities. In Covenant MKI, industry agreed to provide "up to $17.45 million" over three years to produce a market based kerbside recycling system. If industry is agreeable, in principle, to provide additional funding, how much and for what purposes would the funding be used?

My own view is a Covenant MKII without funding will be difficult/impossible to achieve. We should, however, come up with some specific programs (and costings) which will include recycling and also issues such as consumer education programs.

THE "NO COVENANT" OPTION
Failure to proceed to Covenant MKII will be seen as a failure of the self-regulatory model. In that event Governments are unlikely to cast around for another such model.

There will be an environmental policy in place for packaging whether or not we have a new Covenant. Governments simply won't allow a policy vacuum to occur if Covenant MKII doesn't eventuate.

Regulation would be inevitable - or close to it. A national CDL system on beverage containers - despite its manifest inadequacies as an environmental tool - would be the first policy option that would be given serious consideration. The non-beverage sector would be considered for extended producer responsibility initiatives.

In short, the non-Covenant option would be the worst of all worlds for companies in the packaging supply chain.

THE PACKAGING COUNCIL OF AUSTRALIA
I believe the optimum position for all stakeholders is the "status quo plus":

There should be minimum changes to the wording of the Covenant itself. This outcome will allow us to rollover the present Covenant and proceed on the basis that all companies will continue with Covenant MKII. In other words, companies may "opt out" but they don't have to "opt in".

The administrative procedures underpinning the Covenant need to be tightened. This tightening can, and should, be done by the Covenant Council. As an example, the specific procedures to be tightened would include (but not to be limited to) the following:

Action Plans - Plans must be "realistic but also relevant and ambitious" (see Perchard). They must include key performance indicators. Performance must be measured against objectives.

Environmental Code of Practice - Steps taken to ensure the code features more prominently in company Action Plans.

Litter - There should be KPIs for those companies/sectors whose product is prominent in the litter stream.

In principle we should agree to a continuation of funding subject to a review of current arrangements and priorities for future programs. The precise magnitude and purposes for which the funds are to be used to be developed and agreed before finalisation.   We need to impress on governments that the effective rollover to Covenant MKII will be jeopardised if governments are not forceful in implementing the regulatory mechanism. Companies must regard it as a serious option should they not continue as a signatory.

A new Covenant will require signatory Governments to agree, as with the present Covenant, that no environmental policy measures concerning packaging will be introduced for the lifetime of the Covenant subject, of course, to satisfactory performance.

GAVIN WILLIAMS
March 3, 2003

If you wish to contact Gavin Williams about any aspects of this article, please email him on: info@pca.org.au